Smelly Cat?

I vant to suck your blood!

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But if you wanna leave, take good care I hope you have a lot of nice things to wear But then a lot of nice things turn bad out there

(Cat Stevens)

The equity fray is underway as traders decide to go or stay. We knew the first move was gonna be to the downside--Merck (MRK:NYSE), JP Morgan (JPM:NYSE) and Amazon (AMZN:NASD) took care of that--but the bigger (and more difficult) decision is where do we go from here? Let's go to the video tape.

I've spoken to a handful of traders and the consensus seems to be that the sun will peek through the clouds this afternoon. I suppose you can't blame them for having Snapperphobia--how can they not? The conditioned reaction (from both sides of the fence) is to use dips to buy (or cover). That's been the money trade, fer sure, but when it doesn't self-fulfill, you can bank on a bigger spill.

A few themes stand out. OK, a LOT of themes stand out, but let's cover the biggies. Breadth is currently 3:1 negative and, while early, I wanna keep a close eye on these internals for signs of traction. The financials (thus far) have insulated themselves from the JP Morgan pooh and IF (huge if) they can shrug it off completely, it'll be a bullish tell. In four-letter land, the semis are softer (but not slippy) as they ready for the KLA-Tencor (KLAC:NASD) report. Finally, in macro-land, the dollar is getting whomped (retesting the October low) while gold firms once again.

Over in flow's diner, I'm hearing that the selling has taken a respite and some trading accounts are trying their hand on the long side (tech). Again, we're all conditioned to use these dips as nutrition and it's difficult to say whether this time is different. The goal, when trading, is to have a strategy mapped out either way, such that you're not handcuffed by the action. That's easier said than done but remains the task at hand.

For my part, I nibbled a "bit" as a function of discipline but am sticking with my Burned Razor thesis. If they rip 'em higher, I have dry powder to employ and, if not, I can live with my current exposure. Just remember, Minyans, the casino has only been open for an hour and there's LOTS of trading left in the session.